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There’s a Hole in the Bucket, Dear MasTec… (MTZ)

Posted on December 30, 2021

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Back in June of this year, we closed out a big 94% win on MasTec Inc. (NYSE:MTZ).

And today, we’re lining her up for a second go-round.

The Legend.  No Airs.  No Harrumph.

Just a Regular Guy.

For those unaware, MTZ installs cable, piping and power lines above and below ground across the United States.

That said, she’s been on a slow and steady decline for months, and we’ve a hunch the bottom is about to fall out.

Consider some fundamentals –

  • P/E ratio is 18.56,
  • There’s NO dividend,
  • Price to Book is 2.93,
  • EPS FELL this year by 15.30% and Q/Q by 5.80%, and next year
  • EPS are expected to grow by an anemic 0.31%, according to consensus estimates.

In short, this stock is no prize.

The company has been adding new businesses to its roster (most recently, Henkels & McCoy Group), and that accounts for some of the lack of earnings.

Failure of the White House’s massive infrastructure bill to move forward accounts for another chunk of the stock’s failure.

BUT…

It’s our position that MTZ stock is now prepped for a tectonic drop lower – one that sends shareholders scurrying like obedient little mask-wearers in search of a safe space.

Now look at the chart –

Technically –

  1. The decline from the June highs has been significant – better than 25% to date.
  2. At that time, ALL THREE charts (daily, weekly and monthly) registered overbought RSI reads.  This is typical technical behavior at all secular turns.  That is, it’s clear that MTZ is now in the midst of an extended (intermediate-term) bear move.
  3. At present, both RSI and MACD are sub-waterline or struggling to surface (in green) – indicating bears are still in control.
  4. A six-month descending triangle (in red) is bearish. Support arrives at 85.  Below that, the stock dives toward 77 (current price $91.87).
  5. And finally, price is locked below three moving averages, and those MAs are now rolling lower (enlarged, in black).  That will likely seal any further upside at roughly 93.

And it’s for all the foregoing that we believe the bottom is about to fall out on MTZ stock.

A Jew and His Gold recommends you consider selling the MTZ April 14th 85/90 CALL spread* for a credit of $2.30 (11.00/8.70) and buy the MTZ April 14th 90/85 PUT spread** for $2.40 (6.50/4.10).  Total debit on the trade is a dime.

[*Sell the 85 CALL and buy the 90 CALL.  **Buy the 90 PUT and sell the 85 CALL.]

Rationale: the numbers here are outstanding.  We drop ten cents to pocket $4.90 max if things go our way.  That’s 4900% for those without a calculator.

Price has to decline a mere 7.4% over the next four months for a full cash-in – just to the strong support line at 85, and no further.

But we suspect there will be much greater losses for MTZ before then.

Max loss is $5.10 (difference between the CALL strikes plus the initial debit).

We’ll close on any move that looks to have run its course below 85.

Tremendous opportunity.

In G-d Almighty we trust.

Many happy returns!

Matt McAbby

 

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